Beware of Certificate Carrying Contractors

On the surface, [the National Institute of Governmental-Purchasing’s (NIGP) Contractor Certification Program (Frisch Findings, News, August 2004)] sounds like a valuable and legitimate exercise. I have to tell you, however, that it makes every public purchasing instinct that I have immediately go on alert. Following are just a few concerns that immediately jump out at me:

1. Your publisher’s question focused on the fact that it’s important that the vendor community understand the strategic value of purchasing so that purchasing can convince its internal clients that it has strategic value. This is an inappropriate premise. Purchasing professionals must educate their internal clients of their strategic value through training, performance, and example. Once that confidence is earned, the clients will push vendors in the direction of purchasing and the vendor community will recognize its importance.

One of purchasing’s primary reasons for existence is to protect the public’s trust. It does that by protecting, supporting and, yes, facilitating the planning process for its internal clients. It does not accomplish that goal by promoting alliances with the vendor community for the purpose of promoting their own internal importance.

2. Be careful what you ask for; i.e., strengthening of buyer/supplier relationships through communications that lead to partnerships. One large Bay Area city is currently having significant problems because it allowed a buyer/seller relationship to exist and prosper out of control. That relationship led to a ” competitive” acquisition that was clearly slanted toward one manufacturer’s product as opposed to others in the same industry. The result was to set aside an $8 million contract award, pay penalties to other impacted contractors to the tune of $3 million, hold up the timely completion of the city’s new city hall, the loss of employment of two city personnel, and the downgrade of a third high level civil servant. While the media is thrashing public officials for allowing such a condition to exist, that same media is praising the corporation involved for engaging in aboveboard sales strategies.

“Partnerships” sometimes lead to dependencies and dependent situations sometimes evolve into unintended compromise. It’s the unintended compromise, when discovered or recognized that damages the public’s trust in a procurement professional’s ability to fairly and impartially manage their interests.

3. Like it or not, suppliers will view this certification as another sales strategy. “I took the class, I received the certification, so what business can I expect to get as a result?” Small businesses, especially, will view this as a strategic sales maneuver. They are accustomed to seeking certifications of all kinds (SBE, WBE, MBE, etc.) that are supposed to position them to receive more business. Large companies will also use this certification to convince purchasers that they are knowledgeable, experienced, and trustworthy.

4. Of all the training subjects that NIGP intends to provide, I saw nothing that targets the subject of public purchasing ethics and appropriate vendor relations.

5. I agree that this kind of training can lead to a better understanding of public-sector contracting laws, principles, policies, and procedures which should help to eliminate confusion, reduce procurement lead times, ensure quality proposals, and reduce protests and disputes.

You can also bet that a thorough understanding of these issues WILL lead to a greater number of trivial protests that target the elimination of the competition due to inconsequential technical defects.

Large, certified companies will use what they have learned to confuse the contract award process sufficiently to, at least, create for themselves a second opportunity to bid —causing an agency to reject all bids and try again.

I am not suggesting that NIGP’s purpose here is without merit. I do believe, however, that as purchasing professionals we always need to be aware that decisions made with the best of intentions can sometimes result in unintended negative consequences, especially if we fail to be alert to that potential.

To put this in perspective, we need to understand that true partnership is one that has no defined end. It’s like a marriage in that it works, hopefully forever, but sometimes the parties are no longer able to work with one another and break ups occur.

In a partnership, parties work closely together to improve the efficiency of their related business interactions, the levels of service, and even the product being manufactured in an effort to reduce their respective costs and reduce product pricing. These actions serve to essentially change the specifications of the original bid over time creating a specification for which other potential competitors never had an opportunity to compete.

In the public sector there is generally a requirement to periodically test the market with competition.

Suppliers that understand this inevitable event lack the motivation to work closely with a public sector customer that, by law, is not able to unilaterally protect their business relationship. Why work to cut costs and reduce price if their efforts will only lead to competition and its related cost?

At the same time, if the concept of partnering is promoted by the public-sector purchaser the effort is viewed by potential competitors as favoritism and/or collusion.

As a purchasing professional, I feel like a heretic not promoting the value and benefits of buyer/seller partnering business relationships because the concept of purchasing partnerships is a powerful purchasing strategy. However, in the public sector the buyer must be alert and the circumstance must be very unique for this concept to work effectively while staying within the bounds of the law and perceived ethical behavior. Remember, the perception of unethical behavior in the public sector is often as damaging as actual unethical behavior.

Our strategy is to create long-term contracts (five to seven years). Improvements made during the contract period are represented in new contract specifications. All competitors are granted a periodic opportunity to compete and the contract exists for a long enough period of time for both the buyer and seller to experience an economic benefit. If true sole source conditions exist, we’re able to again document the fact that there is still no alternative in the market and then move forward with the creation of a new long-term contract. This strategy may not be as beneficial as a true partnership, but it attracts many of the benefits while eliminating almost all of the pitfalls.

Thanks again, for your efforts in keeping Government Procurement alive. The exchange of ideas that I routinely read about in these magazines serve to keep us all well trained, alert to potential hazards, and aware of emerging opportunities for improvement.

—Paul Ghere,
Manager of Purchasing for the East Bay Municipal
Utility District (EBMUD) in Northern California

What an excellent article [“Aggressive Initiatives Lead Purchasers to the Strategic Table,” August 2004]! Incisive, timely, and most of all useful to those of us struggling with the realities of “maturing” our staffs, adapting upper management, and encouraging elected bodies to recognize procurement’s strategic role in the organization.

I would like to hear what input author Roger Ball or others may have about working within a multi-service and products organizational environment. Although I totally accept the principles and advice in the article, it seems like the time line for organizational behavioral changes is much longer in our multi-product and varied-service organization. This condition is exacerbated by the lack a cohesive product vision, not knowing that they are in fact responsible for a “product,” and the lack the leadership and initiative to set even the smallest of goals.

All this being said, the article is required reading for my staff this month because it blends all the elements of organizational development that our profession should strive for.

Thanks again. Great article!

—Rey A. Palma, CPPB, MPA
Director, Osceola County Florida BOCC,
Procurement Services Office